Mineola, N.Y., October 1, 2014-In a decision issued this week, the Federal Court denied a motion filed by CARFAX to dismiss Bellavia Blatt’s $350 million antitrust case lawsuit. The case will now proceed to the discovery phase.
Bellavia Blatt-which represents over 750 dealerships in this lawsuit (up from just 124 when the suit was originally filed in May 2013)-alleges that CARFAX has illegal alliances with key players in the auto industry, which freezes out competition, thereby resulting in increased prices and unreliable vehicle history reports. Automobile dealers are forced to do business with CARFAX at grossly inflated prices, only to have CARFAX spend these inflated revenues on ads that disparage dealers as dishonest, when it is the automotive shopper who is being misled into believing CARFAX ads that claim its vehicle history reports contain accurate data.
“This recent decision is a substantial victory for the dealers as the Court held that we have asserted legally cognizable claims under the various antitrust laws,” said Bellavia Blatt Senior Partner Leonard A. Bellavia. “This is an important initiative to redress wrongs being committed against both dealers and consumers.”
Bellavia Blatt is seeking substantial money damages per dealership, along with an injunction against the alleged illegal conduct. Please call (516) 873-3000 or email KTimson@DealerLaw.com to obtain information about participation in this very important matter.
Bellavia Blatt, P.C. was founded in 1987 and is a nationally recognized authority in the field of automotive franchise law. The firm represents thousands of automobile and marine dealerships across the country. With offices across the tri-state area, Bellavia Blatt is recognized as one of the foremost law firms in the nation for advocating the rights of franchised or licensed dealers.
Leonard A. Bellavia will be a speaker at the New Jersey Regional Auto Dealers Seminar on October 16 in Hackensack, NJ. and will discuss The Latest Factory Intrusions: The Right of First Refusal in Buy-Sells.
Mr. Bellavia will address the recent proliferation of factory disruptions of the buy-sell process through the rebuffing of buyers in signed buy-sell agreements by the exercise of the right of first refusal (ROFR) in order to exert further control over who enters the dealer network.
Discussion points will include:
. Dealers are paying more attention to the ROFR provision in dealer sales and service agreements as the right is being exercised more frequently
. Both buyers and sellers are being adversely affected by imperfectly executed ROFRs, and resulting litigations have been filed in the last two years to sort out the respective rights of the parties
. The challenges that both buyers and sellers face regarding ROFRs
. How to understand the language in buy-sell agreements so that the likelihood of a factory ROFR and its ensuing problems and delays is reduced
MINEOLA, NY, September 17, 2014-In an amended complaint filed this week, 20 additional terminated Chrysler dealers have joined Bellavia Blatt’s lawsuit against the U.S. Government, raising the total number of plaintiffs to 168.
In 2009, the President’s Automotive Task Force ordered Chrysler to close 789 of its 3,200 franchises as a condition of a government bailout, as it believed Chrysler dealers were an expense to the company, which was later determined to be mistaken. In response, Bellavia Blatt filed a lawsuit stating the termination of the dealerships was a “taking” — a violation of constitutional law, which says the federal government cannot take property without paying “just compensation.” The lawsuit seeks compensation for the terminated dealers for the value of the dealerships.
The U.S. Court of Appeals recently ruled against the U.S. Treasury’s motion to dismiss and allowed Bellavia Blatt the opportunity to amend the complaint, including adding 20 dealer plaintiffs.
“The recent Court of Appeals ruling validates the legitimacy of our lawsuit against the government and gets us one step closer to justice in receiving compensation for these terminated Chrysler dealers,” said Bellavia Blatt Senior Partner Leonard A. Bellavia.
Please visit www.DealerLaw.com for more information regarding this lawsuit.
Senior Partner Leonard A. Bellavia will be a featured speaker at the 2014 NADC Fall Conference in Chicago on October 26-28. Mr. Bellavia’s session is on October 27, and he will address the recent proliferation of factory disruptions of the buy-sell process through the rebuffing of buyers in signed buy-sell agreements by the exercise of the right of first refusal (ROFR) in order to exert further control over who enters the dealer network. Mr. Bellavia will also discuss how transactional counsel can draft language in buy-sell agreements to reduce the likelihood of a factory ROFR and the attendant problems and delays.
The ongoing recall saga has left dealers in a world of confusion, and new threats related to unrepaired units may be larger than they appear.
The 1990 Arnold Schwarzenegger blockbuster “Total Recall” (and its underwhelming 2012 remake) is a futuristic fantasy trip centered around Rekall, a company that sells dreams so real they become actual memories. In the original, after a virtual trip to Mars goes awry, Arnold finds himself in a world of blurred reality as a fugitive, outlaw and revolutionary fighting to overthrow the dictator of a police state. . Or is he?
Since we first reported at the beginning of May on the growing danger of manufacturers exercising the Right of First of Refusal in dealership buy-sells, more cases have come to light (Buyer Beware — Right of First Refusal on the Rise).
The Banks Report has learned of at least eight situations in the last 20 months in which a manufacturer has used the Right of First Refusal to scuttle a potential acquisition from happening.
So far, General Motors and Audi appear to be the most active manufacturers with both using the strategy at least three times since January 2013.
Typically, the Right of First Refusal is included in the sales agreement between the manufacturer and the dealer. It grants the manufacturer the right to bring a buyer to the deal. What often happens is that two dealers negotiate a sale and then notify the manufacturer, who then stops the sale and brings another buyer to the table.
There seems to be at least three situations that prompt a manufacturer to use the tool.
1. They want to block sales of dealerships to buyers they don’t want representing their brand;
2. They want to trim the number dealerships in a specific market;
3. They want a specific buyer in that market — could be a minority candidate or another dealer they’ve promised a store to. GM has used it multiple times to bring a minority buyer to the deal. We may start seeing other manufacturers do the same.
Some thwarted buyers might add a fourth scenario claiming the automaker is punishing them for some perceived infraction or slight.
Additionally, buyers and sellers alike need to be cautious when an acquisition involves multiple franchises. There have been a few cases in which one manufacturer stops a sale of its franchise that has been included as part of a package deal.
There are a couple of states, Florida is one that prohibit its use. Other states have stipulations limiting its use.
In researching the topic, TBR has found cases dating back to the 1990’s in which dealers have sued the manufacturer over its use. But even though the Right of First Refusal has been around for a while attorneys and dealers we have talked to believe it is a growing problem. It is getting greater attention this year.
The last several years, Attorney Eric Chase, a partner with Bressler, Amery & Ross, P.C.has included it as one of the top 20 legal trends facing dealers, an annual piece he writes for DealersEdge and state associations. Leonard Bellavia, a partner with the law firm Bellavia, Blatt, Andron & Crossett, PC is speaking on the topic at the National Automotive Dealer Counsel conference in Chicago in October. In July, Richard Sox, partner with Bass Sox Mercer PA in Florida wrote about it in his monthly column in Dealer magazine. I’ll be including the topic in my keynote State of the Industry presentation at the AICPA.org’s conference in Las Vegas at the end of October.
In 1999, Bob Zimmerman Ford in Iowa tried selling its BMW dealership to John Chizek in Kansas City. BMW ultimately decided to exercise its right of First Refusal (which had been part of the sales agreement between Zimmerman and BMW dating back to 1993).
There was a case in Pennsylvania in 2004 in which Ford used it to negate a sale. It started gaining notoriety in 2008 when the Sonic Automotive Group sued Mercedes Benz when the automaker refused to allow its purchase of the Beck Imports Mercedes store in Charlotte, NC.
In June of this year, the 4th Circuit Court in Virginia ruled in favor of Ford Motor Co. in a case dating back to 2010 when Priority Auto Group was not allowed by the automaker to purchase Kimnach Ford in Norfolk, VA. Another dealer acquired the store and later closed it. Priority sued Ford saying it unlawfully interfered with its purchase.
In another case — this one in 2011 — the selling dealer group, Star Automobile Co. in Georgia, sued Mercedes Benz for exercising its Right of First Refusal. Star was trying to sell its Mercedes store along with its Volkswagen and Nissan dealerships as a package deal. The court ruled in favor of Mercedes citing Georgia law and the retail sales agreement between Star and Mercedes — both of which granted Mercedes the Right of First Refusal.
“The growing use of Right of First Refusal is changing the way the industry is looking at buy-sells today,” says Leonard Bellavia, a partner with the law firm Bellavia, Blatt, Andron & Crossett, PC. “We’re at the point where sellers need to start disclosing at the beginning of negotiations whether the Right of First Refusal is part of the retail sales agreement with the manufacturer.”
Bellavia is involved in two cases in which he’s representing the denied dealers. He’s representing Ed Napleton who tried acquiring the Marubeni-owned Long Island Automotive Group earlier this year but was rebuffed by Jaguar Land Rover. He’s also representing Jonathan Sobel, who owns BMW of Southampton, Mini of Southampton, Audi Southampton and Porsche of Southampton, in a case stemming back to last year when Mercedes Benz denied his attempt to purchase Globe Motor Car in Fairfield, NJ from Linda Cummings. In both cases, the manufacturer brought in Manny Kadre to be the buyer.
Bellavia believes both cases involve situations in which each automaker “imperfectly executed the Right of First Refusal.” One missed a key deadline while the other has yet to receive an application from the preferred buyer.
Another lawsuit involves General Motors. On April 30 of this year, Southern Motors Chevrolet filed a lawsuit against GM for blocking its purchase of Fuller Chevrolet, located in Rincon, GA.
Some industry observers speculate that as more rebuffed dealers push back and sue manufacturers who exercise the Right of First Refusal, automakers may rethink the strategy and be less willing to use it. Bellavia disagrees saying the practice is going to become more common. “More manufacturers are going to use it, but they are going to go to school on these legal cases and learn how to avoid the mistakes.”
The long term — and perhaps short term — effect will be a driving down of blue sky values for franchises whose manufacturers seem more willing to play the Right of Refusal game. “It’s only going to reduce the number of willing buyers,” Bellavia says. “Sellers are going to have be more careful also, because they’ll want to avoid getting into protracted negotiations or lawsuits.”
Cases involving Right of First Refusal in 2013 and 2014 (These are the cases TBR has been able to uncover. There may be more that have gone unreported).
–Audi of Palo Alto (Kuni Automotive was the preferred buyer.)
–Audi of Stammler, CO (Kuni Automotive was preferred buyer)
–Audi in Austin, TX (Former Texas-based Momentum Automotive Group owner Ricardo Weitzis the rebuffed buyer.)
–Globe Motor Car of Fairfield, NJ (Manny Kadre is the preferred buyer. Jonathan Sobel, a dealer in the Hamptons — and a former director at Goldman Sachs — sued Mercedes Benz).
–Fuller Chevrolet in Rincon, GA (Winston Pittman, a minority dealer is the preferred buyer. Southern Motors owned by the Kaminsky family is the rebuffed buyer
–Rinke Cadillac in Warren, MI (Greg Jackson of Prestige Automotive in MI was the rebuffed buyer but was able to convince GM to allow him to buy the store).
–Long Island Automotive Group in Long Island, NY (Ed Napleton, the rebuffed buyer is suing Jaguar Land Rover and current dealer group owner Marubeni Corp. Manny Kadre is the preferred buyer).
–California Superstores Courtesy Chevrolet-Cadillac (Preferred buyer is Momentum Automotive).
A terminated Buick-GMC dealership is free to pursue its claims that the former GMAC illegally used a bounced check as a means to end the store’s dealer agreement and help General Motors cut its dealer network. U.S. District Judge Charles Lovell has refused to dismiss a lawsuit against Ally Financial Inc., GMAC’s successor company, by Grimes Buick-GMC Inc. in Helena, Mont.
A lawsuit brought by auto dealers has put a chill on the potential sale of R.L. Polk & Co., owner of the used-car shopping tool Carfax, according to the people familiar with the matter.
Polk, which provides car companies and consumers with data on autos, has attracted interest from some potential corporate buyers as well as a host of private-equity firms, including buyout giants Carlyle GroupLP and KKR& Co., the people said.
The family-owned company put itself up for sale earlier this year, saying in March it hired bankers to look at alternatives.
In April, a lawsuit brought by owners of 120 dealerships against Carfax accused the company of engaging in anticompetitive practices. Carfax has yet to respond in court. People close to potential suitors say the lawsuit isn’t necessarily a deal-breaker for them, but that they are awaiting more information before moving forward.
A representative for Polk said: “We do not anticipate that [the suit] will have an effect on the ongoing process of evaluating our strategic growth alternatives.”
Carfax is the industry’s dominant provider of vehicle-history information. For a fee, it provides the accident and damage history of individual vehicles, information that consumers have come to expect when buying used cars.
The dealers’ lawsuit says that Carfax has shut out potential rivals by signing exclusive agreements with auto manufacturers and car-shopping websites.
These agreements mandate that only Carfax vehicle-history reports are made available to shoppers on the websites, the plaintiffs allege, saying the arrangement “has stigmatized any listing without” a Carfax report.
Meanwhile, dealers must pay for Carfax reports if they wish to participate in auto companies’ used-car certification programs or to list their vehicles on these popular carshopping sites, according to the suit. The plaintiffs allege Carfax makes up to 90{f15fad3b04d89020a05738ee85256797e9759bd19fdd229b29bad9398df16913} of the vehicle-history-report market.
Polk gained full control of Carfax in 1999 when it acquired the 65{f15fad3b04d89020a05738ee85256797e9759bd19fdd229b29bad9398df16913} it didn’t already own from Blackburn Group Inc., a Pittsford, N.Y. firm that develops risk-management products for insurers.
Polk’s operations go beyond Carfax. Polk provides research, forecasting and consulting for the global auto industry. In the U.S., Polk gathers registration data from every state and provides detailed statistics on the types of cars people buy.
Carfax is Polk’s most well-known consumer product and the data it provides to the auto industry is central to Polk’s business.
Polk could fetch around $1 billion in a sale, people familiar with the matter have estimated. The company in March said it hiredEvercore PartnersInc. to explore alternatives for the company. The family may opt not to sell, the people said.
The Southfield, Mich., company started out in 1870 making city business directories. In the 1920s, Alfred Sloan, the president of General Motors Corp., asked Polk to collect automotive statistics. Polk built up that business into a leading name in the industry for providing hard-to-get analytical information.
NewsdayÂ’s Executive Suite column features Leonard Bellavia, founding partner of Bellavia, Blatt, Andron & Crossett PC, in Mineola. Mr. Bellavia describes how he got into the business of practicing franchise law and answers questions on auto dealer legalities and how to be recognized in todayÂ’s large pool of lawyers.
Attorneys for Eagle Auto Mall, Terry Morris Chrysler-Jeep and Chrysler Group are scheduled to meet Thursday, Oct. 11, in a final pre-trial conference to hammer out a settlement or set a court date in a lawsuit that stems from when the dealerships were rejected during Chrysler’s bankruptcy. U.S. District Judge Leonard D. Wexler on Sept. 28 denied Chrysler’s motion for a summary judgment and ordered the pre-trial conference.
